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Tags: environmental | social | governance | investing

Social Impact Investing: Buyer Beware of Woke Capital Coercion

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Clara Del Villar By Wednesday, 23 June 2021 09:17 AM EDT Current | Bio | Archive

"It’s A Small World" was a memorable song by Richard and Robert Sherman. Sung by the Disneyland Children’s Chorus, it was released at the 1964 World’s Fair. Walt Disney wanted to create a reminder for people around the world to remember the things we have in common so we could learn to live together.

Fast forward to 2021 — our world is more prosperous and interconnected than ever due to breathtaking innovations in travel, communications and commerce.

But today we have shifted from soft, unifying music to endless alarm bells that ring calls for racist outrage, business and academic discrimination rants and deadliest of all for economic growth — catastrophic climate change environmental hysteria.

Why the shift after well-documented progress?

It can likely be argued, through much effort, racial and gender representation is at an all-time high in corporations, entrepreneurial start-ups and universities. In addition, improved health outcomes have increased longevity. But while, to quote the broadcast and print cigarette ad of decades ago, "You’ve Come a Long Way Baby," much work lies ahead.

Corporate transparency and stringent reporting guidelines have never been more widespread and effective. This discipline ensures better accountability, responsibility and insight into financial, operational and governance conditions as well as corporate board diversity.

Finally, decades of innovation have resulted in immeasurable progress toward cleaner, better safeguarding of the environment, but apparently our daily life, health and wealth are still doomed due to the ravages of climate change.

Enter Environmental, Social, (Corporate) Governance (ESG) investing — to give the financial industry investors and advisers a platform to directly address these challenging problems — or so they say. In addition to an immense source of revenue, it seems to be a way to keep today’s perpetual grievance machine churning. 

ESG, which is also known as Social Impact Investing, has been around for decades.

Global ESG assets have exploded and are on track to reach $53 trillion by 2025! But investment guidelines are becoming more loosely defined, more overtly activist and potentially loaded with increasingly draconian rules. ESG assets now total about $37.8 trillion, with Europe accounting for half of these investments. The U.S. had the strongest ESG Fund growth in the past year and is poised to dominate the category by 2022.

Millennials accelerated the growth of sustainable investing over the last decade. A full 76% believe climate change is a serious threat to society. A third of millennials often or exclusively favor ESG investing decisions as opposed to only 2% of Boomers, according to a Harris Poll. This trend appears have gained widespread momentum. Morningstar, a major investment research firm that rates and evaluates mutual funds, reports that 72% of the U.S. population is expressing more interest in sustainable investing.

The true debate needs to focus on what this investment really means and how to treat the corporate sector fairly in regards to financial performance standards and operational independence.

This brings us to the issue of climate risk disclosure requirements. The debate between Republicans and Democrats over climate-risk reporting has centered on whether it is material to a company’s financial performance. Morningstar has endorsed the view that it is.

Now trade associations representing the financial industry and investment advisers as well as congressional Democrats are also supporting efforts by the Securities and Exchange Commission to expand climate-risk reporting by public companies.

As the asset growth in ESG continues expanding, as well the hefty management fees and business opportunities that accompany it, a consensus is building among investment firms led by Blackrock that yes, increasing regulatory requirement is the right path.

The SEC has a history of significant oversights and blunders that rocked the financial markets such as the subprime mortgage catastrophe of 2008.

It would be best for this agency to stay focused and engaged with securities laws and market stability to protect investors as volatility increases.

Sen. Pat Toomey, R-Pa., ranking member on the Senate Banking Committee, says the move for more climate risk disclosure has little to do with providing material information for investment purposes. Activists are simply using climate policy as a vehicle to impose progressive political views on publicly traded companies and the country.

Are a small group of investors and CEOs now determining what is good for American society in place of our democratic process and Free Markets?

By capturing trillions of dollars of investments and assuming an aggressive ''woke" narrative, enormous power is now concentrated in the hands of a few capitalists instead of all Americans. 

There has been scant analysis into the consequences of capricious climate related regulatory burdens to specifically address global warming — or even social justice — for that matter.

Currently, a majority of S&P 500 firms publish voluntary reports disclosing climate change statistics. However, there is concern of significant or endless legal liability tied to mandatory disclosures. In addition, costly regulations will likely further discourage future companies from becoming publicly traded. That would deny major wealth building opportunity to retail investors.

This mix of blurred goals and stakeholder capitalism isn’t going to end well. It will not lead to greater wealth or any real progress on sustainable impact investments in the long run.

Clara Del Villar is Director of Senior Initiatives at FreedomWorks Foundation. Her financial industry career included senior roles in Investment Management, Private Asset Management, and Capital Markets. Her entrepreneurial ventures involved digital media as Founder, CEO of The Hispanic Post; energy tech as founder of InEnergy and health tech. She is a former adviser at 60 Plus Foundation. Currently, she is a Board Director at General American Investors Co. and Executive Committee of Weill Cornell Women's Health Symposium. She earned a BSFS at Georgetown University. Read Clara Del Villar's Reports — More Here.

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Activists are simply using climate policy as a vehicle to impose progressive political views on publicly traded companies and the country. ...
environmental, social, governance, investing
Wednesday, 23 June 2021 09:17 AM
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